Expenses difficult to justify: Travel, Hotels and Restaurants

You may need to visit a client in another town and need to stay overnight. Or perhaps you need to attend a course, a seminar or a fair in another country. What expenses can you include in your books?The following are excluded from this benefit:

Any expense needs to meet the following two criteria to be included in the books.

Ordinary and necessary. It must be related to your business activity and necessary, i.e. a carpenter can claim for a hammer, an accountant…hardly.

There must be a proper invoice as documentary proof to support the expense, with all the relevant information.

The reason for the expense.In certain cases, as the one we are showing below, point 1 above needs to be demonstrated unequivocally. That is, in case of an inspection by the tax office, the proof to be supplied is of the type that would normally be accepted in a court-room (well documented).

Should your travel expenses be easily confused as personal, you will need to provided documents that prove the reason for your trip. For example:

A contract signed during the visit, or an order sent by the client shortly after can justify the need for a visit.

An invoice for attending a seminar, showing the dates in which it was held, can justify the travel and hotel fees of those days. Let’s not mention that a 2 day-course does not justify a hotel bill for a 7 days of stay.

Emails exchanged with your client commenting the need for a visit, or setting the appointment can proof that your trip was done for business purposes.

How much is the expenseThere is a limit to the amount you can spend on dinners and accommodation per day. If the expense exceeds the limit the invoice is still valid but can only be deducted up to that amount.

Remember, if you provide a weak reason, or in any other mean fail to be convincing, the inspector will take away the expense and apply a penalty for incorrect tax deduction, beside claiming the unpaid tax.